The continued strengthening of the US dollar is putting downward pressure on the yen, with the market focusing on Japanese fiscal policy and US manufacturing data.
2025-11-03 14:00:05
The dollar continued to rise against the yen at the start of the new week, remaining near its lowest level since mid-February. Investors remained uncertain about the timing of the Bank of Japan's next interest rate hike, especially given the expectation that new Prime Minister Sanae Takaichi would introduce aggressive fiscal spending.
This policy expectation overshadowed previously strong inflation data from Tokyo, weakening the yen's support. Meanwhile, generally optimistic sentiment in global financial markets reduced demand for safe-haven assets, further pressuring the yen.
The US dollar, bolstered by the Federal Reserve's hawkish stance, remained near its highest level since August and is poised for further strengthening. Despite ongoing economic concerns stemming from the US government shutdown, investors generally believe its short-term impact will be limited.
The Bank of Japan kept interest rates unchanged last week, despite two board members, Naoki Tamura and Hajime Takada, voting to raise the rate to 0.75%. Governor Kazuo Ueda stated after the meeting that there is currently no clear timetable for interest rate hikes.
New Prime Minister Sanae Takaichi advocates using fiscal stimulus to address inflationary pressures and boost economic growth, which has strengthened market expectations that the Bank of Japan will continue to maintain an accommodative stance.
Market analysts pointed out: "The Takashi City government's fiscal expansion plan has reduced the need for monetary policy tightening, and the Bank of Japan may continue to remain on the sidelines as inflation has not yet stabilized."
On the other hand, Federal Reserve Chairman Powell's speech last week was interpreted by the market as "more hawkish," leading investors to lower their expectations for another rate cut in December. The CME Group's FedWatch tool shows that the market's expectation of a Fed rate cut in December has fallen from 93% a week ago to 68%.
This supported the overall strength of the US dollar and also boosted the USD/JPY exchange rate. In US politics, as the government shutdown entered its 33rd day, President Trump again called on Republican senators to repeal obstruction rules to expedite budget passage, but the deadlock remained unresolved.
Trump also stated that he is not currently considering allowing Ukraine to acquire long-range missiles, which, along with easing tensions among Asian countries, weakened market demand for safe-haven assets and further pressured the yen.
The market will now be closely watching the US manufacturing PMI data and speeches by several Federal Reserve officials, which are expected to provide short-term direction for the dollar's movement.
From the daily chart analysis, the USD/JPY pair successfully broke through the key resistance zone of 153.25 to 153.30 last week and stabilized above 154.00, indicating that the upward momentum remains strong.
Technical indicators such as the RSI remaining in positive territory and not yet in overbought territory suggest that the exchange rate still has room for further gains. If the bullish momentum continues, the next target may be the 154.75 to 155.00 area. Conversely, if the price falls below 154.00, the area around 153.25 will become the initial support level, and a further break below this level could trigger a short-term pullback, with a target of the 152.00 area.
A Tokyo-based foreign exchange strategist said, "As long as the exchange rate holds above 153.00, the USD/JPY pair still has the potential to continue its upward trend. While the risk of market intervention exists, there are no strong signs of it yet."
Editor's Note:
From both a policy and technical perspective, the weakness of the yen reflects the asymmetry between the Japanese economy and the global liquidity cycle. If the Japanese government continues to expand fiscal spending while the Bank of Japan maintains a dovish stance, the strong performance of the USD/JPY exchange rate may continue for the next few weeks, unless the Federal Reserve clearly shifts to easing or the Japanese authorities intervene substantially.
This policy expectation overshadowed previously strong inflation data from Tokyo, weakening the yen's support. Meanwhile, generally optimistic sentiment in global financial markets reduced demand for safe-haven assets, further pressuring the yen.
The US dollar, bolstered by the Federal Reserve's hawkish stance, remained near its highest level since August and is poised for further strengthening. Despite ongoing economic concerns stemming from the US government shutdown, investors generally believe its short-term impact will be limited.
The Bank of Japan kept interest rates unchanged last week, despite two board members, Naoki Tamura and Hajime Takada, voting to raise the rate to 0.75%. Governor Kazuo Ueda stated after the meeting that there is currently no clear timetable for interest rate hikes.New Prime Minister Sanae Takaichi advocates using fiscal stimulus to address inflationary pressures and boost economic growth, which has strengthened market expectations that the Bank of Japan will continue to maintain an accommodative stance.
Market analysts pointed out: "The Takashi City government's fiscal expansion plan has reduced the need for monetary policy tightening, and the Bank of Japan may continue to remain on the sidelines as inflation has not yet stabilized."
On the other hand, Federal Reserve Chairman Powell's speech last week was interpreted by the market as "more hawkish," leading investors to lower their expectations for another rate cut in December. The CME Group's FedWatch tool shows that the market's expectation of a Fed rate cut in December has fallen from 93% a week ago to 68%.
This supported the overall strength of the US dollar and also boosted the USD/JPY exchange rate. In US politics, as the government shutdown entered its 33rd day, President Trump again called on Republican senators to repeal obstruction rules to expedite budget passage, but the deadlock remained unresolved.
Trump also stated that he is not currently considering allowing Ukraine to acquire long-range missiles, which, along with easing tensions among Asian countries, weakened market demand for safe-haven assets and further pressured the yen.
The market will now be closely watching the US manufacturing PMI data and speeches by several Federal Reserve officials, which are expected to provide short-term direction for the dollar's movement.
From the daily chart analysis, the USD/JPY pair successfully broke through the key resistance zone of 153.25 to 153.30 last week and stabilized above 154.00, indicating that the upward momentum remains strong.
Technical indicators such as the RSI remaining in positive territory and not yet in overbought territory suggest that the exchange rate still has room for further gains. If the bullish momentum continues, the next target may be the 154.75 to 155.00 area. Conversely, if the price falls below 154.00, the area around 153.25 will become the initial support level, and a further break below this level could trigger a short-term pullback, with a target of the 152.00 area.
A Tokyo-based foreign exchange strategist said, "As long as the exchange rate holds above 153.00, the USD/JPY pair still has the potential to continue its upward trend. While the risk of market intervention exists, there are no strong signs of it yet."
Editor's Note:
From both a policy and technical perspective, the weakness of the yen reflects the asymmetry between the Japanese economy and the global liquidity cycle. If the Japanese government continues to expand fiscal spending while the Bank of Japan maintains a dovish stance, the strong performance of the USD/JPY exchange rate may continue for the next few weeks, unless the Federal Reserve clearly shifts to easing or the Japanese authorities intervene substantially.
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